Indian bond yields rise on higher oil prices

Mumbai: Indian federal bond yields rose on Tuesday, 11 September, after firm oil prices stoked concerns of a spike in inflation in the coming weeks.

At 10:20am (0450 GMT), the yield on the 10-year federal bond was at 7.85%, up from the previous close of 7.83%. Oil, which traded near $78 a barrel, is India biggest import and a major component in calculating the wholesale price inflation. Annual inflation was at 3.79% for the week ended 25 August, below the previous week’s 3.94%.

“The sustained rise in global oil prices has made investors wary about its impact on inflation,” a foreign bank trader said.

The government has said that it aims to keep the inflation rate close to 4%.

Traders said some investors sold bonds ahead of expected outflows this week. The central bank will sell Rs65 billion (Rs6,500 crore, $1.6 billion) of treasury bills at its weekly auction on Wednesday, but no bond auctions are scheduled this week.

Corporate tax payments of Rs350 billion are expected to be made from the end of the week, which could further squeeze available cash.